NOCIL Limited (NOCIL) Q2 FY23 Earnings Concall Transcript

NOCIL Limited  (NSE:NOCIL) Q2 FY23 Earnings Concall dated Nov. 09, 2022

Corporate Participants:

Sudhir Ramchandra Deo — Managing director and Executive Director

V. S. Anand — Deputy Managing director and Executive Director

P. Srinivasan — President of Finance and Chief Financial Officer

Analysts:

Bhargav Buddhadev — Kotak Mahindra — Analyst

Aditya Khetan — SMIFS Institutional. — Analyst

Nirav Jimudia — Anvil Research — Analyst

Dikshit Mittal — LIC Mutual Fund — Analyst

Damodaran Narayanan — Acuitas Capital — Analyst

Ravi Mehta — Deep Financial Consultants — Analyst

Rushabh Shah — RBSA Investment — Analyst

Rohit Nagraj — Centrum Broking. — Analyst

Nishita Shah — IDFC Mutual — Analyst

Dhruv Muchhal — HDFC Asset Management — Analyst

Shiv Chanani — Baroda BNP — Analyst

Viraj Parekh — JMP Capital. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the NOCIL Limited Q2 FY 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. S. R. Deo, Managing Director of NOCIL Limited. Thank you, and over to you, sir.

Sudhir Ramchandra Deo — Managing director and Executive Director

Thank you. Good morning, and a very warm welcome. I hope you had a safe Diwali and wish this new year brings prosperity and joy. Along with me here, I have Mr. Anand, our Deputy Managing Director; Mr. P. Srinivasan, our CFO; and SGA, our Investor Relations adviser. Hope you all have received our investor presentation by now. For those who have not, you can view them on the stock exchange and company website. I hope you and your loved ones are safe and doing well. We will begin with the business updates for Q2 FY ’22-’23. We generated INR389 crores in the operating revenue during the quarter. We grew by 4% year-on-year, owing to better realization as we implemented price increases, proportional to raw material price increases. However, on quarter-on-quarter basis, saving prices largely remained flat.

As communicated during our previous investor calls, the sales volume was impacted on account of global recessionary trend on a quarter-on-quarter basis. The silver lining among this situation is that the profit parameters adjusted to the volume, remained flat. Coming to the debottlenecking projects and new capex, the debottlenecking project, which we had initiated a couple of quarters back, is going as per schedule, and we are fully committed to complete the same.

Regarding the new capex, I would like to highlight that the plan is under evaluation. And looking at the current global economic scenario, we will take the final call at an appropriate time. Similarly, regarding the ramp-up of new capacity, the current global economic scenario makes it difficult to provide the exact time line.

Now I will hand over to Mr. Anand, our Deputy Managing Director, for his views on medium- to long-term outlook as well as ESG initiatives.

V. S. Anand — Deputy Managing director and Executive Director

Thank you, Mr. Deo, and good morning to everyone on the call. Let me just walk you through a couple of points from the medium term scenario and also speak about the ESG-related initiatives. On the medium-term scenario, given the energy scenario in light of the geopolitical issues, we are looking at a possibility of a Euro plus one scenario panning out similar to the discussions on the China plus one strategy. It will be noted at this point that the discussions are very much in the initial stages. But these green shoots augur well for players like us with a strong R&D.

We would also like to inform you that NOCIL — as we speak about R&D, we would also like to inform you that NOCIL has been awarded with the Indian Chemical Council’s Best Industry Academia Collaboration Award last month. This award was instituted for the first time, is a validation of the decades of fruitful collaboration for research between NOCIL and academic institutions. With spec, manufacturing capacity is available NOCIL has a strong appetite to grow further in the rubber chemicals business. Coming to ESG-related initiatives to highlight a few. NOCIL’s goal is not only to comply with environmental regulation, but also to incorporate cutting-edge technologies such as green chemistry.

Our research center has a skilled team dedicated to advancing environmental research and green chemistry, thereby promoting sustainable business practices. NOCIL has adopted and implemented the 5S workplace organization method as a responsible corporate citizen to promote productivity, safety and waste reduction. To maintain a sustainable environment, we have also implemented a 3R approach to pollution prevention and waste management that is reduce, reuse and recycle. As a responsible care company, we have always sought continuous improvement in the areas of environmental protection, health and safety and secure transportation of raw material and delivery of finished products. That’s it from my side for now.

Now I would like to hand over to Mr. P. Srinivasan to give you an update on the financial performance.

P. Srinivasan — President of Finance and Chief Financial Officer

Thank you, Mr. Deo, Mr. Anand, and good morning to everyone. Hope you all are safe and in good health. Now let me take you through — run through some of the key financial highlights. Sales volume for Q2 ’23 grew by 17% as compared to — or the index level of 117 as compared to 100 when you compare Q1 FY ’20 as a base. On a quarterly — sequential quarter basis, we have de-grown by 22%. This was basically anticipated in view of the global recessionary trend, which impacted the sales volume. On a half yearly basis, we have witnessed a moderate growth in the sales volume. Coming to the revenue parameters.

The revenue for Q2 FY ’23 stood at INR389 crores as against INR375 crores for Q2 FY ’22, our year-on-year growth of 4% and a degrowth of 23% as compared to the previous quarter. Net revenue for half year FY ’23 stood at INR898 crores. For the H1 FY ’23 as compared to INR720 crores for H1 FY ’22, a year-on-year growth of 25%. On the operating EBITDA parameters, operating EBITDA for Q2 FY ’23 stood at INR61 crores as against INR49 crores in Q2 FY ’22, year-on-year growth of 24% and INR101 crores in QY — FY ’23, a degrowth of — sequential degrowth of 39%. Operating EBITDA for H1 FY ’23 stood at INR163 crores as against INR122 crores in H1 FY ’22, a year-on-year growth of 33%. EBITDA margins for Q2 FY ’23 stood at 16% as compared to 13% FY ’22 and 20% in Q1 FY ’23. The profit before tax or PBT parameters for Q2 FY ’23 stood at INR49 crores as compared to INR41 crores in Q2 FY ’22, a growth of 18%, and INR88 crores in Q1 FY ’23 there’s a drop. H1 FY ’23 PBT stood at INR137 crores as compared to INR104 crores for H1 FY ’22. Profit after tax resultantly came down to INR36 crores for Q2 FY ’23 as compared to INR31 crores in Q2 FY ’22. Whereas as against Q1 FY ’23, it was INR66 crores. The profit after tax for half year FY ’23 stood at INR102 crores as compared to INR78 crores in H1 FY ’22.

With this, we would like to open the floor for question and answer session.

Questions and Answers:

 

Operator

Our first question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

Bhargav Buddhadev — Kotak Mahindra — Analyst

My first question is on the export outlook. You have mentioned in your opening commentary that there is a slowdown in export demand. And this is a big business for us, given that it accounts for about 35-odd percent of revenue. So what is the outlook going forward? And do you see any structural issues as far as export demand is concerned?

V. S. Anand — Deputy Managing director and Executive Director

Yes. So this is Anand here. So while we’ve also kind of commented on this that we see an outlook even in the last call, that there are those recessionary trends that are kind of looming over us. We see this from an outlook point of view, the demand is expected to stay muted. But I don’t — we don’t see any structural specific issues. It’s more from a specific also a sentiment point of view that there is a bit of destocking that tends to happen with this sentiment. But at least for the next two to three months, it is expected to be muted. Yes.

Bhargav Buddhadev — Kotak Mahindra — Analyst

Okay. And my second question is, you alluded to this Europe plus one strategy to play out for NOCIL. But for that strategy to play out, we should have capacity which we may run out by maybe FY ’24 end. So why are we sort of delaying in terms of new capex plans given that there is a big opportunity in knocking at the doors?

V. S. Anand — Deputy Managing director and Executive Director

So like we’ve mentioned, capacity expansion is not only limited to greenfield or a major brownfield. Debottlenecking has also been actively giving us capacity increases over the years. And looking at the current utilization levels as well as we go forward and as the demand ramps up, we are evaluating the situation, and we will take the call at the right time.

Bhargav Buddhadev — Kotak Mahindra — Analyst

Yes. Okay. And any timelines in terms of how much time will it take to set up a new capacity?

Sudhir Ramchandra Deo — Managing director and Executive Director

See as far as setting up of the new capacities is concerned you must understand the strength of NOCIL. We already have a surplus land at Dahej. Second thing when we are talking of debottlenecking, debottlenecking actually brings in substantially good capacities. These are all low-hanging fruits. So as we said that NOCIL has capacities to meet the opportunities, which are likely to come out of Europe plus 1. And as far as your question is concerned, we don’t see any capacity constraint, at least for next two to three years.

Operator

We’ll take the next question from the line of Aditya Khetan from SMIFS Institutional.

Aditya Khetan — SMIFS Institutional. — Analyst

Sir, my first question is on the volumes part. Sir, this quarter, volume drop has been roughly around 23% on quarter-on-quarter basis. So this is only because of exports or domestic also has taken some impact?

V. S. Anand — Deputy Managing director and Executive Director

So domestic, we’ve still seen a moderate growth in volumes. A large part of it is coming from the export business.

Aditya Khetan — SMIFS Institutional. — Analyst

So sir Domestic dip in volumes, it could be 4%, 5%, is that number would be taken on?

V. S. Anand — Deputy Managing director and Executive Director

You broke off at the end. Can you just repeat yourself, please?

Aditya Khetan — SMIFS Institutional. — Analyst

Sir, the domestic dip in volumes, so that would be around 4%, 5% is that.?

V. S. Anand — Deputy Managing director and Executive Director

We didn’t have a dip. So we didn’t have a dip in domestic volumes.

Aditya Khetan — SMIFS Institutional. — Analyst

You didn’t have a dip in domestic volume. So sir, considering a drop of 23% only…

Operator

Sorry to interrupt Mr. Khetan, if you are on a speaker mode, can you switch to handset and speak. Your audio is a bit muffled, sir?

Aditya Khetan — SMIFS Institutional. — Analyst

Hello?

Operator

Yes, go ahead.

Aditya Khetan — SMIFS Institutional. — Analyst

Now is it okay?

Operator

Yes, please go ahead.

Aditya Khetan — SMIFS Institutional. — Analyst

Yes. sir, so considering the 23% drop in export only business, so that indicates that for quarter-on-quarter basis, only the exports business as a percentage of overall volume that has dropped to roughly 40%, 50%?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think I will address very differently, Aditya. Basically, exports — I think Mr. Anand in the — in his earlier remarks, he alluded to that. There are certain markets which went through restocking or overstocking this was there, and that has impacted that business very substantially. I think one should look at the — just for clarification purpose, look at the IRSG data for the consumption of various markets. So it’s a reflection of that, and that market degrowth in certain markets played out on the export front also for us. So that’s the key part. So whenever the — if you’re degrowing in relation to the degrowth in rubber consumption, you are at par. We have not degrown to the extent what are — we have got a higher market share in that. But what we are trying to say is the market in a particular region have degrown in certain markets because of the demand outlook or excess stocking, etc. So that affected in certain products for us, and which is a more of temporary nature which is what he indicated. So it’s not a structural issue. It’s more of temporary nature.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. Sir which are these geographies or markets, sir, which are witnessing demand issues? And what would be the export share as a percentage of revenue for this quarter?

Sudhir Ramchandra Deo — Managing director and Executive Director

Export share and revenue as a percentage this quarter.

Aditya Khetan — SMIFS Institutional. — Analyst

Yes, sir.

Sudhir Ramchandra Deo — Managing director and Executive Director

It will be below 30%.

Aditya Khetan — SMIFS Institutional. — Analyst

Below 30%. And which are the markets which are witnessing sort of demand issues as you mentioned as well?

V. S. Anand — Deputy Managing director and Executive Director

So from a market point of view, we see — so we operate all across. And there has been a drop across regions, be it Asia, Europe or the U.S.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. Sir, realization has been almost flattish. So this is — so despite the volatility in the major raw material like aluminum and benzene. So what do you attribute to this resilience in pricing of rubber chemical?

Sudhir Ramchandra Deo — Managing director and Executive Director

I couldn’t get the question..

V. S. Anand — Deputy Managing director and Executive Director

Again boss, just to rephrase. So did you ask something about the raw materials?

Aditya Khetan — SMIFS Institutional. — Analyst

Yes, yes. So what I was asking that the raw material prices has been quite volatile like aluminum and benzene but the realizations has been almost flattish. So what is attributing to this resilience into the realization of rubber chemical?

Sudhir Ramchandra Deo — Managing director and Executive Director

So the — just — I think these are to be frankly disjoint fares. If you really look at raw materials, as you have rightly said it, they continue to be volatile because oil prices, benzene and benzene derivatives continue to be volatile. As far as the finished good prices are concerned, okay. They — basically, they are governed by the market situation on demand and supply. So it is not always that we can co-relate the variability of raw material with the finished good prices.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. So sir, so considering the supply is limited or demand has gone up. So what has — actually, so that is leading to the robust realization of rubber chemical. If you can highlight a bit more on this.

Sudhir Ramchandra Deo — Managing director and Executive Director

See basically, I think if you really look at it, when we talk of recession, the meaning of recession is the demand has gone down. Okay. And when the demand has gone down and probably 75% of our chemicals, which are manufactured in China, they continue to manufacture. It’s going to always effect the chemicals process.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. So the Chinese supply is getting some sort of — so they are closing down or they are — so temporary — so shutting down. Is that the reason? Like what is holding the pricing of rubber chemicals globally?

Sudhir Ramchandra Deo — Managing director and Executive Director

We have no information in terms of China shutting down. But if you really see even within China, the demand has gone down, probably maybe the operating rates have down.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. Operating — sir, demand has gone down. So that should actually led to decline in realization no issues I mean.

V. S. Anand — Deputy Managing director and Executive Director

Just to kind of extend that. So that — when the local demand — so what the point was, when the local demand in China is lower, there is always a tendency for these volumes to find that the markets in — international markets, and that’s where the pricing comes under pressure..

Aditya Khetan — SMIFS Institutional. — Analyst

Okay, good. And sir this weaker export demand, so do you think sir this could trickle down into these domestic market also and we should start seeing the premium in the domestic demand also in the coming quarters?

V. S. Anand — Deputy Managing director and Executive Director

So if you — I think largely, I think we know this that they’re not completely decoupled from what’s happening in the rest of the world. And it also depends on how our customers are spreading their portfolio. because if you have a large exposure to exports, then you tend to get impacted. So it will be difficult to comment at this point in time.

Operator

Mr. Khetan, I’m sorry, but may we request you to return to the queue. There are several participants waiting for their turn. We’ll take our next question from the line of Nirav Jimudia from Anvil Research.

Nirav Jimudia — Anvil Research — Analyst

Sir, two questions. So one, just a clarification on what Mr. Srinivasan was mentioning on the IRSG data. So like if we see your slide number 20, where you have mentioned the global rubber consumption data. So from 2019 to 2021, we have seen rubber consumption going up by one million tonne roughly. So this translates to almost 35,000 tonnes of rubber chemical consumption. Now when we are seeing from 2021 to 2022, I think the fall in rubber consumption is almost to an extent of 0.7 million tonnes, so which roughly translates to almost 25,000 tonnes. So my question is, this 35,000 tonnes growth, what we have seen from 2019 to 2021, our incremental volume share, what we have got during those times is protected during this fall, let’s say, the fall currently is 25,000 tonnes in terms of the rubber chemicals. So our volume lost is lesser than what we have gained earlier in — from 2019 to 2021, just to reconfirm these facts.

P. Srinivasan — President of Finance and Chief Financial Officer

Yes, definitely. So I think if you look at our volumes also, I think it’s definitely much lesser than what the market is reflecting. Partially also to answer, when you look at these global numbers, these are numbers that also reflect a drop in China, for example, yes, or the rest of the other markets. So we might not be in some of the markets which are — where the drop is more sharper. So — and also we have — it’s also customer-to-customer relationships that tend to play out. So definitely, the drop is not to that extent. Yes.

Nirav Jimudia — Anvil Research — Analyst

Got it. Sir, so this brings me to the second question. So like if we — sir if you can just help us explain out of roughly around 1.1 million tonnes of global rubber chemical consumption, how much is the share of specialty volumes. Probably we are in some of the specialty products, which we cater to the export market predominantly. So if you can say or if you can just quantify in terms of what could be the specialty markets globally out of this 1.1 million tonnes?

Sudhir Ramchandra Deo — Managing director and Executive Director

It will be less than 5%.

Nirav Jimudia — Anvil Research — Analyst

Okay. It is — so out of those global consumption of 1.1 million tonnes 5% is the specialty market?

Sudhir Ramchandra Deo — Managing director and Executive Director

Yes, 5% to 6% maybe just estimate. It’s a — we don’t have accurate data, but it’s more of 5% to 6%.

Nirav Jimudia — Anvil Research — Analyst

Okay. So sir, what we have seen in this quarter, our export volumes got impacted. So — and predominantly, what we sell in the export market is more of specialty volumes also based on some earlier interactions. So — does those volumes have impacted and because of which our volumes have come down? So if you can just quantify out of this 20% to 23% volume for which we have seen this quarter, how much could be the fall in the specialty volumes?

P. Srinivasan — President of Finance and Chief Financial Officer

I think Mr. Anand alluded to that. It is across all markets. So it’s not confined to one specific region or one specific product. It’s a combination of weighted average across all global markets. So the fall has been seen, the recession has been seen. So that’s how we see.

Sudhir Ramchandra Deo — Managing director and Executive Director

From the quantum of our total exports, it’s a mix of — it’s a large part of the nonspecialty and specialty. So I think when you look at a drop, I think it would not be right to say that the drop is more on specialty, yes. So it’s kind of across the board..

P. Srinivasan — President of Finance and Chief Financial Officer

Yes.

Operator

Our next question is from the line of Dikshit Mittal from LIC Mutual Fund.

Dikshit Mittal — LIC Mutual Fund — Analyst

Sir, my question is on U.S. exports. So currently, out of your total, how much is the U.S. currently from the –?

P. Srinivasan — President of Finance and Chief Financial Officer

Just repeat the question, please?

Dikshit Mittal — LIC Mutual Fund — Analyst

Out of the total exports, what is the U.S. run rate per month, if you can share?

P. Srinivasan — President of Finance and Chief Financial Officer

I don’t have the data right now. Maybe I will share it with the SGA in the coming days. Maybe the

Dikshit Mittal — LIC Mutual Fund — Analyst

Okay. And sir, I think you were hoping that maybe by middle of next year, our capacities can be fully utilized. So based on the current scenario, so what are the basically base case now assumption in terms of current utilization?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think at the starting point, our MD did say that it’s a challenging situation. One cannot put any definitive time line. This is already in the starting speech he made a comment on that.

Dikshit Mittal — LIC Mutual Fund — Analyst

Right, okay. Sir, in terms of like underlying demand, as you mentioned, like part of that is because of the destocking at the customer’s end. So basically, if you can just give us a sense what is the underlying demand for these basically chemicals?

Sudhir Ramchandra Deo — Managing director and Executive Director

So if I were to understand your question was what is the underlying demand? Or was it referring to the destocking?

Dikshit Mittal — LIC Mutual Fund — Analyst

I’m just saying because part of the volume decline is one of destocking also. So what is the underlying demand growth? So — because I think till destocking maybe one or two quarters down the line, we can see the restocking as well. So underlying demand is how much is the earn-out?

Sudhir Ramchandra Deo — Managing director and Executive Director

That would be difficult to quantify at this point, so precisely and so because — so it’s kind of a pretty volatile situation and things are changing rapidly. So difficult to put a number to that.

Dikshit Mittal — LIC Mutual Fund — Analyst

Okay. Sir, lastly, as you mentioned, this China domestic demand is also basically the — so do you see any risk that Chinese exports may actually start finding their way into export and that can depress the pricing also?

Sudhir Ramchandra Deo — Managing director and Executive Director

Yes. So that is playing out to a certain extent in the markets because it’s not only completely linked only to the raw materials like we said, but also in terms of wanting to utilize capacity of Chinese players. So that does put pressure on the prices of other things you could say.

Operator

The next question is from the line of Damodaran from Acuitas Capital.

Damodaran Narayanan — Acuitas Capital — Analyst

The first question is again on your guidance on full capacity utilization by March ’24. This is what we had guided last time around. So what specifically has changed in this quarter that we are now sort of, I mean, we’re dropping that guidance? And can you point to a few metrics that in this quarter that have come out, that has led you to change that guidance? So that’s the first question.

Sudhir Ramchandra Deo — Managing director and Executive Director

So basically, as I addressed you, I think when we addressed you in the last quarter, and when we are addressing you right now as you are aware, the business challenges have completely changed. And I think to put the time frame for these challenges, okay, is a very difficult thing. And probably, I think all of us know, we are aware of the challenges, but we are not aware of the timeframe for the challenges. And that’s the reason it is very difficult to put the time frame in terms of capacity utilization.

Damodaran Narayanan — Acuitas Capital — Analyst

But can you — I mean, what exactly has changed? I mean, is there a metric or is it that your — I mean, you had forecasted some percentage of demand to come through that is not — can you give me some numbers or such that you have looked at or which has caused you to change this?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think if you really look at the various things which we have been addressing, I think we have clearly said that the demand is slowing down and the slowdown is accelerating, okay? Now I think the rate of acceleration when it — till what time it will continue to accelerate probably — at least we are not in a position to foresee that. And that’s the reason we are saying that looking at these challenges, it is very difficult to put a timeframe for capacity utilization.

Damodaran Narayanan — Acuitas Capital — Analyst

Okay. Sure. That explains, I think, the first question. The second one that I had was now given that, I mean, we are seeing some recessionary trends what would you comment on the sustainability of this realization that you are seeing? I mean, this quarter, it has been flattish on a Q-o-Q basis. And as a result, I mean, even our EBITDA per tonne is below than our historical level. So I mean, could you comment on the sustainability of these? I mean, how do you see that in the coming quarters and years?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think if we look at a short-term view, I think the challenges will continue as we are saying because the — and I think only the quarter by quarter, we can see how the things progress.

Damodaran Narayanan — Acuitas Capital — Analyst

Okay. On a longer-term basis, there is no actually — there is nothing to be — I mean, you can go by whatever historical levels of profitability we shall maintain. Will we still look at maintaining that?

Sudhir Ramchandra Deo — Managing director and Executive Director

If you really look at long term, I think NOCIL is in a very sweet spot as far as a long term is concerned. Because first and foremost thing, NOCIL has volumes. NOCIL has a brand equity in the market. And in fact, what’s happening in terms of Euro plus, which we talked which manufactures about 15% of the other chemicals all over the world. So if you take the distribution 75% at China, 15% at Europe and 10% at NOCIL, probably, this opportunity of Euro plus, which we see at this point of time could actually create a very healthy business proposition for NOCIL in long term.

Damodaran Narayanan — Acuitas Capital — Analyst

Sure. So the long-term picture is certainly brighter is what you would say?

Sudhir Ramchandra Deo — Managing director and Executive Director

Long term, we are pretty confident that NOCIL has a very good future.

Operator

Our next question is from the line of Ravi Mehta from Deep Financial.

Ravi Mehta — Deep Financial Consultants — Analyst

Yes. Just wanted to check that since the demand environment is slowing down, are you seeing some trends of realization softening because as you alluded that even the risk of Chinese dumping is also playing out in a way or there are different markets we try to segment and address that to protect our realizations? So some color on that.

V. S. Anand — Deputy Managing director and Executive Director

So like it’s kind of also taking off from — I think it’s related to what Mr. Deo said in the previous response, there is short-term challenges on the realization, maybe a quarter or 2. But then clearly, in the long term, there are plans which kind of try to see how we can secure our businesses. And we are expanding our presence with customers which make it more resilient. Yes.

Ravi Mehta — Deep Financial Consultants — Analyst

And one more thing was that I agree that the long-term outlook is robust, given the Europe plus one opportunity. But in near term, maybe like a year or so, can the China plus one helps us protect our volumes in a soft market environment? I can understand some destocking and all maybe one or two quarters bad is understandable. But overall, can that help us protect volumes and we can do better?

V. S. Anand — Deputy Managing director and Executive Director

That is playing out. That is playing out, and that will continue to be a factor.

Operator

Our next question is from the line of Rushabh from RBSA Investment Manager.

Rushabh Shah — RBSA Investment — Analyst

Yes, sir, in the previous call, you had mentioned that last 1.5 years, China has changed the strategy of pricing. And now you are saying that they are again started dumping again due to slow demand in China. So is there any reason why that change in the earlier and now again coming back because demand slowdown?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think if you really go back to what we talked as a team probably six months back, we didn’t foresee the challenges which the world is facing. And I think all the geopolitical events, the recessionary trends have really slowed down the demand, okay? So if you compare what we were saying six months back, of course, we didn’t foresee that this is what is going to happen in the world. But currently, if you really ask me, I think that there is slowdown in the demand and which is affecting the business more on short-term basis.

Rushabh Shah — RBSA Investment — Analyst

Okay.

V. S. Anand — Deputy Managing director and Executive Director

Just to add this. I think the key thing is in December ’20 or thereabout, when China started adjusting its prices in relation to the raw material costs, the principle continues to remain the same because — and they have been going for almost 1.5, two years, 1.5 years at least, where they adjusted the pricing according to the increase in corresponding proportionate increase in input cost. What we are seeing today is more of a slowdown. In a slowdown, you cannot expect everyone to adjust the price as per where we want. It all depends on the volume of surplus, etc. So I think we may have to wait for a quarter or so, then we will — before we see the real effect of China’s approach.

Rushabh Shah — RBSA Investment — Analyst

Okay. Sir, what’s the reason like is there an export incentive removed from the Chinese government? Or that is still available to them?

V. S. Anand — Deputy Managing director and Executive Director

That is still very much.

P. Srinivasan — President of Finance and Chief Financial Officer

There’s no change.

Rushabh Shah — RBSA Investment — Analyst

Okay. Okay. And sir, last con-call you mentioned that in the long-term vision is to reach double-digit market share. So that is still intact. Maybe when the initially you might have envisaged you might have, say, over five to seven years period and now maybe it must have reduced a couple of years. So that stays intact, right?

Sudhir Ramchandra Deo — Managing director and Executive Director

Absolutely. Absolutely.

Rushabh Shah — RBSA Investment — Analyst

And sir, in FY ’18, our market share was around 4.5%. So if you have any number at current capacity, what will be market share in global — in current scenario? Is it a 5% or 6% as on date?

Sudhir Ramchandra Deo — Managing director and Executive Director

So I think that — so given that actually also just what Mr. Srinivasan was alluding to about the rubber consumption data and lower growth rates of the market, which is also reflected in the slide, which we shared with you. This will have to be worked out. Yes, I think we should still be maintaining or slightly above where we were last year.

Operator

Our next question is from the line of Rohit Nagraj from Centrum Broking.

Rohit Nagraj — Centrum Broking. — Analyst

So first question is, sequentially, our other opex has remained largely flattish despite almost 22% volumes going down. Any specific reasons as to which and all costs have probably impacted this overall opex?

P. Srinivasan — President of Finance and Chief Financial Officer

Large part of this opex expenses is fixed in nature. So it will be flattish by and large, for a quarter. And even when you are operating at a relatively lower capacity operating rates, you were — some of your variable expenses also becomes fairly variable in nature. So that is the reason for that.

Rohit Nagraj — Centrum Broking. — Analyst

Right. And in any costs, are we seeing a flattening or probably a reduction in terms of transportation cost or the energy cost in the last 1, 1.5 months?

P. Srinivasan — President of Finance and Chief Financial Officer

Transport — freight cost has come down. Definitely, we are seeing a reduction.

Sudhir Ramchandra Deo — Managing director and Executive Director

As far as the energy costs are concerned, Rohit, I think you are aware of that international scenario. And India cannot isolate itself from the energy costs, which are affecting the whole world. So more or less, we are there where the world is there.

Rohit Nagraj — Centrum Broking. — Analyst

Right, right, right. Sir, second question is in terms of the raw material costs. So during last quarter, we had seen quite a bit volatility. But now more or less, the crude has settled between $95 plus minus $5. So have we also seen our raw material costs more or less stabilizing during the current quarter?

Sudhir Ramchandra Deo — Managing director and Executive Director

I think Rohit what has happened in the world is those correlations of our raw materials with crude and benzene they are no more existing because of the individual product demand, supply and manufacturing situation and the volatility in our raw material continues to be there.

Operator

Our next question is from the line of Nishita Shah from IDFC Mutual Fund.

Nishita Shah — IDFC Mutual — Analyst

So you alluded that near term, there are challenges and…

Operator

Ms. Shah I’m sorry to interrupt you. Volume is a bit low ma’am. Can you switch to handset and speak?

Nishita Shah — IDFC Mutual — Analyst

Am I audible now?

Operator

Better.

Nishita Shah — IDFC Mutual — Analyst

Yes. So I was saying that in near term, we are facing challenges. In the long term, you mentioned on Europe plus one as well. So can you explain a bit more on what would the trigger for export growth in the future? So will it come from new markets or new regions, or maybe new products that we are looking at or any new products in the R&D? So maybe a trigger for export growth is what I’m looking at.

V. S. Anand — Deputy Managing director and Executive Director

Yes. So Nisha, I think business development or business growth is always a combination of the factors that you said, yes? So it’s a combination of penetrating already our existing customers where we have strong relationships, strong position. So there is an opportunity to penetrate, and we would like to leverage that. It’s also about new markets and new customers, where we will expand our existing products. And there is also a part of — a small part of new products that we would want to also expand. So it’s just a combination of all three that tends to look positive.

Nishita Shah — IDFC Mutual — Analyst

Okay. So let me rephrase the question. So let’s say, out of the top 15 diode manufacturers, how many does we have a relationship with business relationships with? And so how do we plan to deepen them? Would we take up new regions with the same manufacturer or adding to new products? So any more granularity on that part?

V. S. Anand — Deputy Managing director and Executive Director

So we are mostly present with all the top tier players across the world. So I think we could — you can — we can say that it’s about expanding our presence with them. So it’s also sometimes a plant to plant approval that takes its time. So we are in the process of doing that. That’s been ongoing, and we just continue to do that, yes.

Nishita Shah — IDFC Mutual — Analyst

Okay. And just a follow-up. You mentioned on plant to plant approval. So what are the timelines that are taken to get the product approved maybe with an existing buyer or maybe similar — same customer, but a new geography or a new plant, what are the brief timelines that are there?

V. S. Anand — Deputy Managing director and Executive Director

So again, it varies, but it’s anywhere from six months to one year.

Operator

The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.

Dhruv Muchhal — HDFC Asset Management — Analyst

Sir, the question was you mentioned about Europe 15% of rubber chemical production. But from your earlier comments, we also understand that in your earlier calls that this would also include capacities which European have probably in outside of Europe. So say, for example, Lanxess having somewhere in Africa or somewhere else. So would we have any better sense on what would be Europe’s own production, I mean production which is based out of physically in Europe?

Sudhir Ramchandra Deo — Managing director and Executive Director

Maybe 10% or thereabouts because they have a pan globe presence. So they have some capacities in China, some of India, something in the U.S. also. Maybe we can say about 10% thereabout.

Dhruv Muchhal — HDFC Asset Management — Analyst

Okay. And sir, related to this, so we have been seeing this issue with the utilities and other things. So from market sense, do you — have you seen that the production has actually started to decline. One is, of course, due to demand. But capacity is closing because of this utility issue or some other issue. Have you — are you seeing that? And in response to that, are the customers coming to you for — or they might already be approved with you because you are already very large, but for a higher share of allocation of volumes or something similar. Have you started seeing that?

V. S. Anand — Deputy Managing director and Executive Director

We haven’t seen plant shutdowns in the rubber chemical space at this point. But we will see certain product lines not being available in certain markets. So I think that’s an indication that there is a bit of stress here.

Dhruv Muchhal — HDFC Asset Management — Analyst

Okay. So they’re getting out of a few set of products to focus on specific depending upon.

V. S. Anand — Deputy Managing director and Executive Director

It would be difficult to comment whether they’re getting out. But it could be even a temporary phase, but it’s — at least that’s what we see in the market, so.

Operator

We’ll take a next question from the line of Shiv Chanani from Baroda BNP Paribas.

Shiv Chanani — Baroda BNP — Analyst

Just as an extension of last couple of questions. There is, of course, a lot of optimism around China plus one opportunity. Just want to understand is there any inflection point that you see from where the demand for you sort of takes off? I mean, is it — or is it more just a normal approval of products that is required over a period of time? I just want to understand that what will basically trigger that offtake in a serious manner as compared to probably more of a linear fashion?

V. S. Anand — Deputy Managing director and Executive Director

I wouldn’t say that there is — it would be right to say that there is going to be a certain inflection point I would see it’s a gradual linear movement that would happen. I agree with that more — that rather than an inflection point because it’s about getting into customers, and it’s about establishing supply circuit, supply reliance and it happens over a period of time, yes. But I would say there is going to be a certain inflection point, but it’s going to be more linear.

Shiv Chanani — Baroda BNP — Analyst

All right. And just to get a sense, have you seen more queries in the last six months as compared to what you would have seen six months prior to that or one year back?

V. S. Anand — Deputy Managing director and Executive Director

Yes, we can say that. I think there has been conversations in that direction that’s been far more at a higher frequency level compared to six months before, yes.

Shiv Chanani — Baroda BNP — Analyst

And typically, what are these conversations like? Are these more saying that, okay, like we are sourcing 80% from China right now, we want to go down to 50% from China? I’m just trying to understand the nature of these conversations.

V. S. Anand — Deputy Managing director and Executive Director

Yes. So typically, these conversations they’re not — we don’t have this kind of what you just said. But I think reading between the lines, there is an indication that there is a keenness to increase share from those, yes.

Shiv Chanani — Baroda BNP — Analyst

And this is what we have seen in some of the other businesses where the customers will typically like to see the capacity on the ground before committing any meaningful volumes, do you think that is going to be a constraint in terms of your customers committing bigger amount of volume?

V. S. Anand — Deputy Managing director and Executive Director

We don’t see that as a constraint, Mr. Chanani. So that’s not a constraint.

Shiv Chanani — Baroda BNP — Analyst

Right. And finally, would you be open to — again, this is just from what we have seen in some of the other industries and some other companies. Would you be open to buying some facilities in these international markets and then sort of transferring those products and lines to India?

V. S. Anand — Deputy Managing director and Executive Director

So all options are always discussed. I wouldn’t say they’re necessarily valuing. But I think we have built our — a lot of our capacities through greenfield and brownfield investments. If the opportunities are attractive, there is always an option to look at things, yes.

Shiv Chanani — Baroda BNP — Analyst

Are you seeing any such opportunities right now?

V. S. Anand — Deputy Managing director and Executive Director

No, nothing, nothing at this point.

Operator

Our next question is from the line of Viraj Parekh from JMP Capital.

Viraj Parekh — JMP Capital. — Analyst

Just one quick one from my side. So what was our capacity utilization overall on a capacity of 110 for the six months and for the quarter gone by?

P. Srinivasan — President of Finance and Chief Financial Officer

Somewhere around 65% to 70%.

Viraj Parekh — JMP Capital. — Analyst

Okay. Okay. Sure. Sure. And considering the commentary given by all of you in terms of ramping up, I think we might see a delay in complete ramping up. Is the original timeline that we were targeting considering the current business challenges?

P. Srinivasan — President of Finance and Chief Financial Officer

I think that is what we’ve made at the start of our announcement. We made a reference to that. So today, it’s very difficult to commit a date because of the way the international market is behaving.

Operator

Our next question is a follow-up from the line of Aditya Khetan from SMIFS Institutional.

Aditya Khetan — SMIFS Institutional. — Analyst

Sir, how much would be the exports to Europe as a percentage of total exports?

P. Srinivasan — President of Finance and Chief Financial Officer

About 20%.

Aditya Khetan — SMIFS Institutional. — Analyst

About 20%. Okay. And sir, there has been a noticeable change in trend over the last few years and over the last few quarters?

P. Srinivasan — President of Finance and Chief Financial Officer

I didn’t get your question, please? Change in the sense?

Aditya Khetan — SMIFS Institutional. — Analyst

Has there been a noticeable change in trend imports exports into the Europe. So currently, it is 20% so considering in FY ’15. So what would be the share of exports to Europe be?

P. Srinivasan — President of Finance and Chief Financial Officer

That has increased. That has increased.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay, okay. Sir, considering now, as sir had mentioned to an earlier participants, so roughly around 10% to 15% of the global capacity and demand would be in euro and considering some of the products may not be available. So just to put in numbers. So considering that 10 lakh tonnes of supply globally, so considering that 10%, 15% or roughly around one lakh to 1.5 lakh tonnes capacity in demand would be in Europe. So considering some of the product may not be — that may not be available. So how much impact — so can you share sort of for these one lakh tonnes so you can go to around 70,000 or 60,000. Any sort of numbers you can share?

V. S. Anand — Deputy Managing director and Executive Director

Mr. Khetan, I think that would be — I think you should also not kind of look at — I don’t see that these volumes are going to disappear overnight. And I think it will be very difficult for us to kind of indicate what would really — how would the situation pan out. There’s so many moving variables at this point in time.

Aditya Khetan — SMIFS Institutional. — Analyst

Okay. And sir, considering now, so this 20% exports to Europe. So considering — so now the Europe plus one theme would be playing. So how do you see this trying to change over the next three quarters and over the next few years?

V. S. Anand — Deputy Managing director and Executive Director

Yes. So I think I would say like we mentioned near term, there is a challenge continuing. But clearly, in the medium to long term, we see the growth at that.

Operator

We’ll take our next question from the line of Rohit Nagraj from Centrum Broking..

Rohit Nagraj — Centrum Broking. — Analyst

So from the customer’s perspective, are we seeing any delays in their expansion plans and that will probably have some impact on the volumes in the near to medium term?

V. S. Anand — Deputy Managing director and Executive Director

So at least I think you know better in the domestic space, you are tracking it. So you know some of the investments are coming on stream. Some of them are happening. Companies are investing. In the international space, we do not see it’s either way, we do not see that there is any sharp increase or a decrease. It seems to be at the same moderate levele there.

Rohit Nagraj — Centrum Broking. — Analyst

Right, right. Sir, second question is on the realizations. So is there any difference in domestic realizations and export realizations for us, particularly.

P. Srinivasan — President of Finance and Chief Financial Officer

It is the adjusted for duties in domestic, and we have the local duties, which is 7.5% plus clearing charges. So it’s about — typically, a common product will be 10% higher price as compared to an export price.

Operator

As there are no further questions, I would now like to hand the floor back to Mr. S. R. Deo for closing comments. Over to you, sir.

Sudhir Ramchandra Deo — Managing director and Executive Director

Thank you. I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with our Strategic Growth Advisors or our Investor Relations advisers. Request all of you to be safe under the given circumstances. Thank you very much.

Operator

[Operator Closing Remarks]